Quote:
Originally Posted by logan5
You got any rough numbers you can share with us? That's a huge piece of property that allows for high density housing. Metrotown condos sell for over 1000/sq ft, plus 6 FSR of commercial. That's got to be a lot of money sitting on the table.
There's an opportunity here to recreate the success of Pacific Centre, or even surpass it. A large mall supported by a thousands of people living and working directly above it, only an elevator ride away. |
Quote:
Originally Posted by logan5
I'd also like to point out that Oakridge Centre, the second most profitable mall in the country, is being redeveloped. Oakridge sold for somewhere in the range of a billion dollars. Metrotown would be worth much more than that. Maybe 3x more.
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There's a couple of things wrong with what you've just written so before I get into the math of it (yes,....sadly there will be math), I will just correct them or point them out.
Just to get the obvious error and flawed premise out of the way immediately.
'Profitability' is not equal to 'Sales'
You realise that, right?
That statistic you're citing is a from a wrongly titled study that was actually looking at highest SALES per square foot
(and probably from somewhere like here:-
http://dailyhive.com/toronto/top-mal...t-january-2018
The headline of the page is "most profitable malls in Canada" and yet the information has nothing to do with 'profit' or 'profitability' but rather is about sales)
This distinction is important since you can't just conflate the two (Ask anyone who runs a business) and also because while 'sales' are a flat metric that give a gross accounting of the activity that went down in the mall, 'profitability' is a two-fold factor that varies on other factors.
1) There's profitability of the various tenants within the mall, which on their part is dependent on their overhead and business operating costs.
and then
2) There's also profitability of the Mall landlord or owner which is distinct from whether the tenants are actually making a profit themselves and yet dependent on the rent they pay as well as the mall owner's own overhead like property rates and such.
Hence a mall can have highly profitable tenants and yet still be losing money for the mall owner or landlord, or vice versa wherein the tenants are not profitable (despite high sales in some cases) with their distress not affecting the Mall owners own profit.
So having made that distinction,
Oakridge Center did indeed have the 2nd highest SALES per square foot (put a pin on that; we'll come back to it in a bit) in in Canada in 2017.
Which tells us nothing about its profitability for the previous or current owner (A statistic that would then play into whether redevelopment is viable or not).
You'd be hard pressed to get profitability numbers since the Mall owners would be hard pressed to release that information to anyone other than Revenue Canada or their shareholders.
But it doesn't matter since we have enough information with the sales numbers to show why redevelopment of Oakridge would make more sense for them while it would be less so for Metropolis.
So taking figures from the Canadian Shopping Center Study by the Retail Council of Canada, from 2017 (compiled in December 2017):
https://www.retailcouncil.org/sites/...CS_3_FINAL.pdf
(warning : here comes the math)
We find out that Oakridge Center had a 'Sales productivity' figure (i.e the total annual Sales PER SQUARE FOOTt) of $1,579
....which is what made it the 2nd highest in Canada. (coming second to Yorkdale in Toronto)
Whereas Metrotown had a sales productivity of $,1031 (putting it at 8th on the list of Canadian malls)
HOWEVER...
Those two figures presented as they are,.... are misleading.
Can you guess why?
Here are two more numbers to help you along
Oakridge Centre, total retail area : - 573,742 sq ft
Metropolis at Metrotown, total retail area - 1,795,326 sq ft
That's right, Metrotown is THREE times as large as Oakridge, which distorts how much retail and sales actually occur there if you only look at the 'sales productivity' numbers.
Now here's that math I was warning you about
:
A more straight comparison comes in the form of total (GROSS) sales per year (as per 2017) when you multiply that 'sales productivity' by the total respective areas:-
Oakridge Center: Gross sales : $905,938,618
Metropolis : Gross sales : $1,850,981,106
So while Oakridge has a 'Sales productivity' (sales per Square foot) figure that is 1.5 times that of Metropolis', the Metrotown mall actually does 2 times as much sales in total.
And consider the fact that this was while one of Metropolis major anchor tenant spaces (the former Target store) was, and has been sitting empty for most of the last few years.
Again, all of this tells us nothing about either malls' actual profitability in terms of how well their respective owners were doing, but considering the various factors under which they were and are both operating (median income of residents, average property taxes and rates for commercial properties in the respective neighbourhoods, leasing/tenancy rates as well as vacancy and turnover rates for tenants, etc) it begins to become clear why it might be an easier decision for the Oakridge owners to pursue wholesale redevelopment than it would be for Ivanhoe Cambridge.
It could also just as likely be that the Metropolis owners are bleeding profits due to costs they shed from the sheer size of the mall (and concurrent property taxes),....but that's unlikely.
A few more things to provide even more context and perspective.
Metropolis is the 2nd busiest mall in all of Canada by Annual Pedestrian count, averaging just under 28 Million visitors per year, and it also happens to sit next to the 2nd most heavily trafficked Transit station (not just Skytrain, but ALL transit) in all of the GVA) after Commercial Broadway.
These two factors are not unrelated, obviously.
There's no pedestrian count number available for Oakridge Center, but it certainly isn't in the top 10 and it's highly unlikely it's even remotely comparable to Metropolis' number.
Added to the fact that the Metrotown area is currently seeing redevelopment that will see an additional (up to) 20 or so towers in the area in the next 7 years, with all those additional frequent visitors and residents, compared to the 7 or so towers that the immediate Oakridge redevelopment would bring it's immediate neighborhood, then you begin asking yourself as an owner how much revenue you're likely to lose and whether the cost of any redevelopment (and long-term profitability and projected sales growth leveraged against a real estate market remaining as hot as it is for the foreseeable future) is worth the investment.
They have a current model that generates just under $2 Billion in sales per year for their retail tenants, with a decent chunk of that going to their lease costs and ultimate profits. See if you can figure out why I wouldn't want to sell the mall (or even a portion of it) much less develop large areas of it, if I were Ivanhoe Cambridge.
One last thing:
I didn't know until I read the report that it would seem like the Metropolis owners really are going ahead (at least as far as the report states) with redeveloping the former Target store space.
I had figured it would be difficult to do given where it sits (above T & T and adjacent to a lot of the mall's and the Metrotower office primary parking areas.
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